UK manufacturing runs out of steam

Manufacturers reported subdued consumer confidence and lower orders from the construction sector as well as high output prices UK manufacturing output fell to a seven-month low last month as a slowdown in new orders highlighted the fragile state of the economy. Manufacturing has been one of the brightest parts of the British economy in 2011, but data released on Tuesday morning suggested that it is now flagging as domestic customers cut their spending. Exports, though, remained healthier with orders rising during April. The monthly Markit/CIPS PMI index of the manufacturing sector fell to 54.6 points in April, the weakest reading since last September. March’s reading was also revised down, from 57.1 to 56.7 – still above the 50-point mark that separates expansion from contraction. The survey also showed that output prices remained near to March’s peak, suggesting that consumers will continue to face rising prices . Many companies reported delays in receiving parts from suppliers, following the Japanese earthquake and tsunami in March. Manufacturers also reported subdued consumer confidence and lower orders from the construction sector. David Noble, chief executive officer at CIPS, said the survey showed that the manufacturing industry faced a much bleaker outlook than just a few months ago, with companies experiencing “a tale of two markets”. “Export orders continue to grow at a very healthy rate but domestic demand is suffering as a result of falling consumer confidence and spending,” said Noble. Manufacturers had built up a healthy backlog of work earlier this year, as orders rebounded after the weather-related disruption last December. CIPS is concerned that many firms ate into their reserves of work during April. “Much of the output growth came from manufacturers clearing the backlog of existing orders which is the equivalent of a consumer dipping into their savings to maintain their existing spending levels,” said Noble. “The problem with this is that, just like savings, backlogs of orders will soon run out if they are not topped up.” Rob Dobson, senior economist at Markit, said that new orders growth had “collapsed from a booming pace”. The pound fell more than half a cent against the dollar, to around $1.649, after the PMI data was released as an early interest rate rise became even less likely. “The survey reinforces worries over the economy’s ability to withstand the fiscal tightening that increasingly kicked in from early April and reinforces belief that the Bank of England will keep interest rates unchanged at 0.50% on Thursday,” said Howard Archer, chief UK economist at IHS Global Insight. “Indeed, we believe it is looking ever more likely that the Bank of England will not raise interest rates before November.” Manufacturing sector Manufacturing data Economics Graeme Wearden guardian.co.uk

Posted by on May 3, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.